Study: Europe's IT industry losing ground

Study: Europe's IT industry losing ground

European IT firms are viewed as less competitive than their Asian and North American counterparts, a new survey of CIOs shows.

European IT firms are viewed as inflexible and expensive compared to their U.S. and Asian counterparts, traits that could make it hard for them to tap expanding Asian markets, according to a new survey of chief information officers (CIOs) by KPMG LLP and the Economist Intelligence Unit.

The survey, titled "A wake up call for Europe," interviewed 126 CIOs, IT managers and directors at 20 countries in September covering industries such as manufacturing, health care, financial services, telecom and IT accounting. The survey asked a range of questions related to the selection of European IT firms as partners.

European firms are expected to be favored at home for their attention to detail and tailoring of products, but "we are beginning to see some of the Asian companies make significant headway" in European markets, said Crispin O'Brien, chairman of KPMG's U.K. technology group. Pricing concessions and greater flexibility in contracts strengthen the positions of Asian suppliers.

O'Brien cited BT Group PLC's selection earlier this year of China's Huawei Technologies Co. Ltd. as one of the suppliers for its 21st Century Network, a £10 billion (US$17.5 billion) voice, video and data network project.

Specifically, the suppliers of IT services, hardware, desktop software and microelectronics are seen as slipping behind. Europe is still seen as strong in production of mobile devices, applications and enterprise software, according to the executive summary.

The survey showed that 84 percent of respondents felt that the U.S. will be home to the strongest suppliers of IT hardware in two years, followed by India at 72 percent and then China at 64 percent. Germany came in fourth at 40 percent.

"I think the U.S. is still seen as the major player in technology," O'Brien said.

Asia tends to view the U.S. as an innovator, and the country has a cost advantage, O'Brien said. But U.S. companies have not proved as adept in tailoring products for Europe.

The advice for European companies is twofold. To compete in Asia, IT firms should look for an Asian partner, O'Brien said. Also, European companies should be wary of offshore manufacturing in places such as China, as the supply chains can become very long as work is subsequently contracted out, he said.

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